General accounting CullumberCompanyisconsidering an investment that willreturn a lump sum of $942,800, 3years from now. What amountshould Cullumber Company payfor this investment to earn a 12%return?

PV= FV/ (1+r) nwhere:PV = Present Value (amount to be paid today)FV = Future Value ($942,800)r =…

Answered: Cullumber Company is considering an…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 19EA: Redbird Company is considering a project with an initial investment of $265,000 in new equipment...

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Please only answer PART F d) Suppose the Internal Rate of Return (IRR) of this investment opportunity is 15%. Based on this information alone, should Limitless Ltd. make the investment? Why?Would this decision be consistent with that from B? Explain your reasoning.e) Suppose that, instead of paying the initial £500,000 now, Limitless Ltd. decides to pay it in equal instalments over the next 10 years. How much would the companyneed to pay each year to make all these payments equivalent to £500,000 today? f) Now assume that an alternative project would generate immediate (time zero) net profits of £500,000 upfront, but after that, it would result in annual losses of£120,000 over the next five years, and then the annual losses of £60,000 over the following five years. The cost of capital is 12% and the IRR is 15%. Should you start this project? Explain your reasoning. Would you make the same decision based on NPV and IRR? Why?
What is the internal rate of return (IRR) of an investment that requires an initial investmen of $11,000 today and pays $15,400 in one year's time?
If An investment costs $23,958 and will generate cash flow of $6,000 annually for five years. The firm's cost of capital is 10 percent? a. What is the investment's internal rate return? Based on the net present rate return, should the firm makeinvestment? b.What is the investment's net present value? Based on the net present value, should the firm make the investment?
Suppose a firm will invest $500 today, $600 a year from now, $700 two years from now, $800 three years from now, and $900 four years from now. What will the future value of the project five years from now assuming the interest rate of 12%? O $3,939.08 $4,303.79 $5,398.68 $4,820.25
You have an opportunity to invest $110,000 now in return for $79,400 in one year and S29,500 in two years. If your cost of capital is 9.5%, what is the NPV of this investment? The NPV will be $ (Round to the nearest cent.)
Ivanhoe, Inc., management is expecting a new project to start paying off beginning at the end of next year. Cash flows are expected to be as follows: 8.00% $432676 $473452 Future value Present value $ 2 If Ivanhoe can reinvest these cash flows to earn a return of 8.00 percent, what is the future value of this cash flow stream at the end of 5 years? What is its present value? (Round answers to 2 decimal places, e.g. 52.75. Do not round factor values.) LA $ 5 Year $484455 $486326 $544444
A company is considering an investment that will cost $759,000 and have a useful life of 6 years. The cash flows from the project are expected to be $450,000 per year in the first two years then $170,000 per year for the last 4 years. If the appropriate discount rate is 16.0 percent per annum, what is the NPV of this investment (to the nearest dollar)? Select one: O a. $316870 O b. $321617 O c. $1834870 O d. $439045

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Cullumber Company is considering an investment that will return a lump sum of $942,800, 3 years from now. What amount should Cullumber Company pay for this investment to earn a 12% return?